A brief-yet-ongoing journal of all things Carmi. You'll laugh, you'll cry, you'll reach for your mouse to click back to Google. But you'll be intrigued. And you'll feel compelled to return following your next bowl of oatmeal. With brown sugar. And milk.

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Saturday, May 14, 2005

Now I'm an analyst

I don't often share the details of my 9-to-5 job in this venue because, frankly, I don't think you'd all be all that interested in my written perspectives on IT and mid-sized businesses. For the record, I'm a senior research analyst at a technology research firm.

I'm going to make an exception this time out because I like how it turned out, and thought you might like to have a peek at what I do in real life.

Here's the story: After spending Thursday afternoon and evening lying on the couch and trying to coax my insubordinate body back to health, I checked my e-mail after kids'-tuck-in and noticed that the CRTC (Canada's government agency that regulates all things in telecommunications, otherwise known as Big Brother) had handed down a ruling on VoIP telephony. It had been expected for a while, and represented a fairly significant piece of news for this market.

Our PR department had asked me to comment. I'm never one to keep quiet when asked to share my opinion.

I analyzed the decision and wrote up a comment on the announcement - to try to help our client base figure out what it means and how it may or may not affect their IT-related decision making. After reading it over, I really liked how the message resonated. It has been released to the wire here, and has also been posted here on the corporate web site, but I've included it here as well:

---Attention Business and Technology Editors

For Immediate Release

CRTC VoIP Ruling Comment

Impact on Mid-Sized Enterprises Expected to be Minimal

London, ON – May 13, 2005 – The impact of yesterday’s CRTC ruling on the regulation of VoIP (Voice over Internet Protocol) will not have a direct, near-term impact on mid-sized enterprises, according to leading information technology research firm Info-Tech Research Group.

“The ruling is very clearly focused on residential, consumer services,” says Info-Tech Research Group Senior Research Analyst, Carmi Levy. “However, the ruling does set a precedent for delivery of business-specific services, and the regulatory environment that will evolve around these services in the months and years to come.”

“With that in mind, CIOs and IT managers would do well to examine the specifics of this decision,” says Levy. “It will serve as a harbinger of things to come as traditional telcos and newly-empowered upstarts turn their attention to business-focused offerings.”

Levy believes that anything that fosters a greater degree of competition will ultimately benefit whoever consumes these services. He says the CRTC decision’s core goal is to facilitate an optimal degree of competition between traditional telecommunications companies and newer competitors who are trying to establish a foothold in local telephony service.

“The CRTC decision will level the playing field by forcing the incumbent telecommunications companies to apply for permission to change rates – while newer competitors like pure-play VoIP provider Vonage and cable providers like Rogers will be able to charge whatever they wish without any regulatory approvals,” Levy says.

“In the longer term, the CRTC has made it clear that its goal is to pull back from regulation as each market becomes sustainably competitive,” says Levy. “This announcement represents a stopgap measure by the CRTC to give smaller competitors a bit of breathing room as they work to establish their own positions in the rapidly growing VoIP market. As competitive critical mass is attained, Info-Tech believes it will be in consumers’ best interests to let the market determine what vendors are able to charge.”

Without this announcement, incumbent telecommunications providers would have had more power to leverage their dominant position in the local telephony market. They would be been able to use predatory pricing as a siege tactic against the newer competitors. This announcement will tie the incumbents’ hands to a certain extent. It is hardly a fatal blow to their future prospects, as they possess the resources to creatively identify and pursue viable market opportunities in the wake of this regulatory decision.

About Info-Tech Research Group

With a paid membership of over 25,000 worldwide, Info-Tech Research Group is the global leader in providing information technology research and analysis to the mid-sized enterprise market. It is North America's fastest growing full-service IT analyst firm.

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Carmi Levy is available for interviews at [snip] or via e-mail at [click the link on the blog, instead]. For general media inquiries please contact ... Info-Tech Public Relations.

I'm not sure I agree with the assessment. Since VoIP is based on internet technology the possibility for competition is nearly endless even if the big Telcos decide to go into it full force. Small companies can put out new competitive products relatively easily.

There are two problems I see. First, giving the government the power to 'greenlight' or not a particular service and regulating how much those fees are will most likely put a barrier to entry up for the small guys. The second and largest problem I see is that when you give government control over something for temporary 'stopgap' measures, by the time they are no longer required no one remembers and the rules remain in place. It invites corruption and more government control over economics which they really do poorly.

Can you think of any 'temporary' measure put in place by the government that has ever been rescinded?

Kimberly: I face this conundrum evern time I post something related the technology side of my existence. Not everyone will choose to follow. That's OK, since I try to cover the entire spectrum. Thanks for reminding me that I need to continue to balance things very carefully.

Psuche: This is a bit of a different case, since the CRTC is tying the incumbent telcos' hands by forcing them to apply for rate changes. At the same time, it is giving free rein to the smaller companies. I disagree that simply because something is based on Internet technology, that should be enough for startups and upstarts to move in and claim a market. If that were the case, TiVo and Vonage would be powerhouses 20 years from now. Won't happen.

The truth of the matter is the major telcos own the local service market. They'll do anything - including anything nasty - to protect it. This ruling reduces the window they have to essentially kill the newcomers, and allows the newcomers to build their own momentum in those critical early stages.

And, yes, I'll give you points for your comment on the temporary nature of government measures. Income tax, after all, was supposed to be a temporary wartime measure. But the CRTC actually has a number of precedents where it pulled back on its mandates after the market was established.